When the big debate about some publishers wanting to bring in the so-called "Agency model" for the e-book industry was raging, one of the more interesting points for me was that the publishers would actually make less money under it than with the status quo. The way it was explained in some articles at the time was e-book stores (Kindle, Kobo, etc.) were actually often selling e-books at a loss, particularly with bestsellers.

My question is, is this practice still going on with books offered by publishers who are not yet on the agency system? The majority of books I buy are non-agency books, and generally fit into one of the two following categories:

Also, since Kobo sends me a new discount code in email once every ten days or so, usually for 20-30% off, and with the help of MobileRead contributors at http://www.mobileread.com/forums/sho...discount+codes it's possible to turn most single use codes into a five-use code, I get and additional 20-30% off all my favourite non-agency books. So my second question is, is Kobo actually making money off of me after these additional discounts? I don't want to "work the system" by using these unintentionally multi-use codes such that non-agency books always lose money for the e-book store of my choice, I want to be fair to everyone. My girlfriend already refuses to turn them into multi-use codes, thinking that it's unfair and not wanting Kobo to lose money over the practice.

AFAIK, the only diffrence between agency and non-agency books is that the price is fixed by the publisher, so no discounts can be applied. I believe Amazon calls it "the price is set by publisher". The ebook-store is always making money unless they sell it for free. The loss gets pushed over to the publisher / author.

... The ebook-store is always making money unless they sell it for free. The loss gets pushed over to the publisher / author.

Someone with better insights please correct me if I am way off.

Since no one else has commented...

I don't think this is the case. I believe the publishers (for non-agency books) sells the ebook at some price to Amazon, and then Amazon can sell it for whatever they want. If Amazon sells it for less then they paid, Amazon takes the loss. It worked this way pre-agency pricing also.

The ebook-store is always making money unless they sell it for free. The loss gets pushed over to the publisher / author.

Someone with better insights please correct me if I am way off.

In general for non-agency books the retailer pays a percentage of the books list price (say 50%, but it varies) if the retailer discounts below that percentage then they're making nothing and/or taking a loss depending on where they've priced things.

There are instances where a retailer will cut special deals with a publisher where they have a sale (like a theme sale or xx books for $$$ or less type sale) and those specific books are sold to the retailer at a much lower price and therefore the publisher and author make less.

In general for non-agency books the retailer pays a percentage of the books list price (say 50%, but it varies) if the retailer discounts below that percentage then they're making nothing and/or taking a loss depending on where they've priced things.

So as long as the price I pay doesn't go significantly below 50% of the list price, odds are that the e-retailer isn't losing money (at least not directly, obviously there are credit card fees, etc.), it would seem.

Can of worms! Amazon had to stop it's practice of selling every book on the NY Times best seller list for $9.99 when the agency rules took hold. Now Amazon can not deviate in anyway from the price set by the publisher, (for agency-six books). Retailers cannot bundle agency-six books with other non-agency books and offer a discount. The online retailer Fictionwise.com built an entire store around bundling and discounting books. The agency-six rules pretty much destroyed the Fictionwise business model.